Life Insurance and BRFs

[Dougsbpc]

We just started a 401(k) plan for a small employer. They did have a DB plan that recently terminated. The 100% owner rolled over her benefits to the 401(k) plan including a Life Insurance policy.

Would the 401(k) plan need to provide Life Insurance policies simply because the business owner rolled over her benefits that included a Life Insurance policy?

Thanks.

[Mike Preston]

No.

[Belgarath]

If future premiums are paid from funds other than the rollover account, then there might perhaps be an issue? Mike, what do you think?

[Bill Presson]

Just an FYI, rollovers aren't considered contributions when performing the incidental test.

[Mike Preston]

I think the plan is not qualified if expenses related to rollover assets (whether life insurance or real estate or anything else you can think of) are paid and attributable to non-rollover monies.